Self-interest should drive companies to community contribution

Smith believes that corporate responsibility to community derives from corporate self-interest: corporations exist to make money, and if helping its community helps a corporation make money, whether by attracting clientele or educating future employees, then it should do so. This enlightened self-interest can keep companies profitable for many years.

Citing this Excerpt

Oral History Interview with Sherwood Smith, March 23, 1999. Interview I-0079. Southern Oral History Program Collection (#4007) in the Southern Oral History Program Collection, Southern Historical Collection, Wilson Library, University of North Carolina at Chapel Hill.

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I’m interested to have you share your perspective. Let me broaden to a couple general matters of the philosophy of government and its relation to the business sector. What’s your sense of a corporate entity's -- this is conceived in those wide ranging terms -- proper relation to the community at large, the public good, if you will? What’s the corporate range of responsibilities there?
SS: Well, I think corporate responsibility to the community at large is derivative. I think the corporation’s only reason for existence is to perform a certain commercial function and to do that well with due regards to its products and services, its customers, its investors and to be successful at doing that. Otherwise, there’d be no reason for the corporation to exist. I think you have to do those things well. I think if you’re ultimately in that scenario, you have to be ultimately answerable to the people who own the business [and] who provided the capital, of course. They could take their capital and put it elsewhere and start another business. Then I think, as you operate in a community, you don’t operate in a vacuum. I think it’s tremendously important for a corporation to realize and act on that. Its [the company is] going to be more successful in a community that is, first of all, growing in terms of the quality of life and in many cases in the quantity of life. A community that has a good educational system, a community that has a good system of social services -- largely provided in our country, as you know, by the private sector whether that’s United Way or other agencies--. I think that company’s going, over the long term, to be more successful than a company that operates where that doesn’t happen. I think a company should take the long view of things. There may be things that the company would like to do or would resist doing because of the need to make more money or to spend less money in the short term. But maybe in the longer term, if it did something differently, that would be likely to produce a better long-term result. Corporations usually, by their legal nature, are of indefinite perpetual existence. I try to think about the long term. In our business, you have to think about the long term. It would take five to six years to build a new coal-fired plant, twelve to fifteen to build a new nuclear powered plant. You have to think in terms of long term. I think that corporations today realize that a great deal is expected of them, in terms of the way in which they conduct their business, the way in which their employees act. There’s a public out there that expresses its opinion with regard to your activities. To the extent that the public feels that you do contribute to the over all welfare of society, in addition to being run effectively and making a profit, I think you’re going to be well received and more successful over time. I think you see many companies investing more time and money and resources into community-based improvement activities than you did before. I think that’s good. I think you see many other companies, for a variety of reasons, that may not chose to do as much as might be the business norm, but I think that’s to be expected in our society. I think you’re always going to have these groups of companies. It may reflect the type of business that they’re in. We’re in the public utility business. We’re in a service business. It’s natural that the people who work here think in a service way. We would always lead the United Way in many different ways in this community. Well, I think that’s normal and natural. It’s not something that’s forced. Our people generally operate in that way. I think this whole question of corporate social responsibility is going to be discussed widely throughout the country. We’re in prosperous times now. I think it means that corporations are in a position to give more to education, to give more to environmental causes, [and] sometimes to provide more executive talent. Although as we compete globally and we streamline our management, it’s going to be more and more difficult, I think, to provide the human resources for society for other non-business purposes than we have before. In North Carolina you see that many of the North Carolina businesses that were owned here are now parts of larger companies. If you looked across the state and said, “Can we get a group of CEOs of North Carolina owned businesses?,” there’d be fewer people on that list than before. The furniture companies have merged, the banks [have merged]. Fortunately, the three major ones have stayed here. Textiles have merged. Other companies have merged and agricultural is consolidating. Personally, I’ve always felt [that] a way of looking at the world was that it was important to try to help those that are less fortunate and do the things that you could to provide more opportunities for other people. I think that’s sort of the way the country has grown and always will grow.